- Proposal would enhance role of head of euro finance ministers
- 2025 target date set for ending euro fragmentation at IMF
The European Commission made a fresh push to bolster the euro area’s weight at the International Monetary Fund, seeking to give the currency bloc a single voice in the IMF by 2025.
The proposal is part of efforts to strengthen Europe’s single currency after the debt crisis forced five members to request emergency international aid and pushed one of them -- Greece -- to the brink of an exit from the euro area. The plan would make the euro-area president, currently Dutch Finance Minister Jeroen Dijsselbloem, the currency zone’s spokesman on the IMF’s Board of Governors and in its International Monetary and Financial Committee. It would also create a euro-area representative on the IMF’s Executive Board.
The commission’s proposal, made on Wednesday in Brussels, will need the support of European Union governments. In a sign of the uphill fight that the plan faces because of national rivalries in Europe, a similar initiative made in 1998 as the euro was about to be born has gone nowhere and is being withdrawn by the commission.
“Our voice in the IMF is not commensurate with the euro area’s economic weight,” Valdis Dombrovskis, vice president in charge of euro policy at the commission, the EU’s executive arm, told reporters as he presented the new initiative. “Having a unified voice would actually make it much stronger and stronger also than individual voices of individual euro-area member states, even the big member states.”
This is among the first concrete measures to emerge from a June 2015 report by commission President Jean-Claude Juncker on completing Europe’s economic and monetary union, which has been rattled by six years of debt-crisis fighting during which Europe and the Washington-based IMF have made emergency-aid pledges totaling 582 billion euros ($661 billion) for distressed euro-area governments and banks. The report foresees a series of stage-one initiatives to be taken by mid-2017.
The batch of measures unveiled on Wednesday also includes a proposal to governments for a system of “national competitiveness boards,” which would track the performance of countries on matters such as wages and productivity, and a commission plan for a “European Fiscal Board” to advise on the enforcement of the EU’s rules limiting budget deficits and debt.
Next up on the legislative front is a proposal, due by year-end, to help complete Europe’s banking union by moving toward a common deposit insurance system -- a step that Germany currently opposes. The forthcoming initiative will focus on reinsurance as backstops for national deposit guarantee systems.
Meanwhile, the commission isn’t shying away from highlighting the complexities of the goal to bolster the euro area’s clout at the IMF. For example, a euro-area representative on the 24-member Executive Board of directors would require changing an existing system in which the 19 current members of the European single currency are represented there through two single seats -- for Germany and France -- and through six “constituencies” of IMF member nations.
“External representation of the euro area at the IMF is, for the moment, highly fragmented and not very effective,” the commission said in a paper accompanying its proposal.
The proposal sidesteps the politically sensitive question of whether the establishment of a euro-area representative on the IMF Executive Board would require Germany and France to relinquish their own seats and, by extension, their own constituencies.
On the IMF Executive Board, the goal is “direct representation of the euro area by the Executive Director of a euro-area constituency, following the establishment of one or several constituencies composed only of euro-area member states,” according to the proposal.